What is the primary function of insurance for an individual?

The primary function of insurance for an individual is to protect against financial risk. Insurance serves as a safety net that helps individuals manage unforeseen events that could result in significant financial loss, such as accidents, illnesses, or property damage. By paying a relatively small premium, individuals can transfer the potential burden of high costs associated with these risks to the insurance company.

This mechanism allows individuals to have peace of mind, knowing that they have some financial support in place should an unfortunate event occur. The concept of risk management through insurance is fundamental; it helps individuals maintain their financial stability and ensures they are not alone in facing the potentially devastating consequences of unexpected incidents.

In contrast, while increasing personal wealth, gaining social status, or creating business partnerships may be associated with other financial strategies, they do not encapsulate the core purpose of insurance. Insurance is fundamentally about managing risk and safeguarding oneself financially from the uncertainties of life.